The National Association of Mortgage Brokers is seeking a greater role for the industry in fulfilling heightened affordable housing goals policymakers currently have, according to President Linda McCoy.
This is one of the aspirations the organization is pursuing as part of its legislative agenda for 2022, said McCoy, a Mobile, Ala., broker who describes herself as all-too-familiar with the frustrations involved in trying to help entry-level borrowers obtain mortgages to buy lower-priced homes.
It’s a conversation that could hold broader importance for the mortgage industry as lenders increasingly turn to the third-party originators to expand their outreach to home-purchase borrowers as refinancing wanes, adding to the impetus to serve a wider range of consumers.
McCoy recently shared her view of what could be done about barriers to homeownership for these borrowers, and recounted some of the conversations the group has had with public officials about how some of these hurdles could be overcome.
The association also is renewing its calls for more leeway in limits on certain types of broker compensation that its members say have discouraged the origination of small loans under the qualified mortgage definition.
McCoy also is hopeful that growing familiarity with trigger leads in the hot housing market will finally lead to legislators to put a simple limit on the sale of borrower contact information obtained from when credit histories get pulled as part of the mortgage process.
What follows are excerpts from that conversation, edited for clarity and length.
What legislative and policy issues will be top of mind for the NAMB in the coming year?
We're getting ready for our legislative conference in D.C. in April and we've already got Federal Housing Finance Agency Director Sandra Thompson as one of our guest speakers. We have visited with her and discussed the agency’s initiative on getting more low-to-moderate income borrowers into homes. One of NAMB's goals is to help brokers and small lenders be the boots on the ground for consumers and give them information on how they can utilize appropriate government-related programs.
We also would still like to see something done about trigger leads. Those continue to be a problem for consumers. When any loan officer takes an application, one of the first things they do is pull credit, but once they do, the credit bureaus know because it's tagged as a mortgage lead. So immediately the credit bureaus sell these leads to other mortgage lenders, banks, trigger lead companies, etc. Once the lead is sold, the consumer generally receives a phone call or some other method of communication regarding their mortgage application. Since these leads cost money, you get a high-pressure salesman on there who can be very misleading. A lot of times they confuse people by saying they are with the company that originated the credit pull and they are gathering additional information in order to provide the borrower with a pre-approval. That’s not true, and it makes people think that they're receiving a call from the office of the original loan officer they worked with when they’re not. What we would like to see is something done about that because customers who know and trust us will think they're talking to somebody in our office, and then they get their credit pulled again.
It's very confusing and we feel like the solution would be a limitation placed on trigger leads where a consumer opts in to have their information shared as opposed to today’s process of opting out. The process could be similar to a borrower affirming the acceptance of electronic signatures. The borrower could check a box at the time of the initial credit pull that they are allowing the information to be shared. People should have the right to shop but know what they’re getting into when they do, and not have their information distributed without their consent.
We're hoping that we're going to get some traction in D.C. this year. We do feel like something will get done. We talked to several members of congress.
Has the hot housing market called more attention to the trigger lead issue?
I think so. It’s been a wild ride, right? When is it all going to stop? I don't know. The market has slowed down a little bit, but it often does during the winter and the holidays. Then it picks back up. People need a lot of help accessing this market today, and that puts a spotlight on pulling credit.
What was NAMB’s meeting with Sandra Thompson like?
She really wants to help low- to moderate-income people. She really listened. We also discussed the recent announcement regarding the loan-level price adjustments applied to second homes and high balance loans. Those pricing changes are hitting second homes hard. While NAMB supports the agency’s desire to increase homeownership for low- to moderate-income borrowers, we believe that this could be achieved in a different manner. An alternative may be applying LLPAs to investment properties as opposed to second homes.
How could brokers do more to help fulfill affordable-housing policy goals?
The people that need our help the most are those with low-to-moderate incomes. Increasing access to loans for low- to moderate-income borrowers is critical for many reasons, including allowing homeowners to stabilize their monthly housing expenses, build equity and accumulate wealth. It is our responsibility to look at ways to help resolve this issue.
Government-related programs for low-to-moderate income borrowers don’t always get shared with brokers by lenders. Also, brokers may find it challenging to make small loans because it would cost us money, and you can't stay in business for long if you're paying in order to close loans. That’s the unintended consequence of the 3% cap on points and fees for qualified mortgages, which includes those included in the rate set by the lender and effectively tends to be a 2.75% cap for brokers. If broker compensation that lenders include in the rate was excluded and only the commission payment to the originator was counted for third-party originators, we could help make more small loans. I think maybe policymakers need to make a carve out for mortgage brokers who are similar to small community banks.
The Consumer Financial Protection Bureau has a carve-out for small creditors. Small creditors play an important role in the mortgage industry because they generally try to maintain ongoing relationships with customers in a single community. The small mortgage broker business is generally the same and should be afforded some flexibility, particularly with regards to lender-paid compensation being included in the 3% points-and-fees cap.
Brokers can get above a break-even point if a loan is maybe $150,000 depending on their business model and costs. Brokers might even be able to go down to $100,000, but I get calls every day from people who want to buy houses in the $60,000 to $80,000 range. Occasionally, they are looking at a home with an even lower price point. Sometimes I can't help those people. I could send them to the banks but it’s unlikely they're going to spend the time to help those people. So it's a numbers game. We want to be able to help those people. It’s why I opened up my own business. Every now and then, we’ll help someone even though it costs us money to help, but if I did it all the time I’d be out of business really fast. We could help so many more people if we had a carve out.
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